#213: How The Fed Funds Rate Affects You

The Fed Funds rate does not immediately impact the average consumer

The Fed Funds rate does not immediately impact the average consumer or investor. It is the rate that the banks charge each other for overnight loans. Unless you are a large bank, the Fed Fund rate doesn’t affect your bottom line immediately.

Trickle down impact

However, because this is a base rate for highly credited borrowers, it will slowly trickle through as higher rates to the average consumer. When you see the Fed Funds rate go up or down, you may see your interest rate vary accordingly on something like your mortgage or credit card. Because you are a less credit worthy borrower than a large bank, you will likely pay a higher interest rate off that base.

While the Fed Funds rate does not immediately affect you, it most likely will affect you at some point. The Fed Funds rate is also a good way to understand the economy as a whole.

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.